Breaking it down to the extreme basics, IVA stands for ‘Individual Voluntary Arrangement’. This is one of the options available for people who are in a situation of serious debt to paying off creditors. As the name would suggest, the arrangement is voluntary, unlike other forms of debt repayment that may be enforced by law.
IVAs are usually recommended for debts that exceed £15,000 and they are a more formal, legally binding arrangement compared to options, such as debt consolidation. With an IVA, an agreement between all parties (all creditors and debtor) must be made on how the balance will be repaid.
To be eligible for an IVA, you must demonstrate that your monthly income does not cover living costs and debt repayments. The beauty of IVAs is that you only repay the debt when you can afford to do so.
The agreement will state how much monthly repayments will amount to, and this will be worked out by an Licensed Insolvency Practitioner. The monthly payments will be worked out on a case-by-case basis, meaning there is no set amount; it really depends on your circumstances.
IVAs usually last for 5 years, but the length of time for which they run can be reduced if lump sums can be paid off. IVAs usually mean that you repay around 20-25% of the outstanding balance to creditors. In order for the arrangement to go ahead, 75% of creditors (worked out by the total amount owed) must be in agreement.
Once the agreement is in place, it is legally binding and creditors are forbidden from communicating with the debtor.
Find out more about applying for an IVA with IVA Zebra
